Traditional Culture Encyclopedia - Traditional culture - Why can RMB hedge foreign exchange options in both directions?
Why can RMB hedge foreign exchange options in both directions?
The reason is to hedge the exchange rate risk. Foreign exchange option is a financial instrument that allows the buyer to buy or sell a specific currency at a predetermined exchange rate on a specific date in the future. For enterprises or individuals, holding RMB against foreign exchange options can be used to hedge the risks brought by exchange rate fluctuations. Whether RMB depreciates or appreciates, it can be hedged by buying or selling options to reduce the impact of exchange rate fluctuations on business or assets.
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